Question

It’s 2017 and Faaz and Hima have been married for 30 years. Faaz has contributed to the CPP for 40 years and can collect the full CPP benefit. Hima has contributed to the CPP for 30 years and can collect 40% of the 2017 CPP benefit. They would like to split their CPP pension. What will be their respective CPP benefit amounts after the split? SHOW YOUR WORK.

Answer 1

Monthly Maximum Benefit of CPP for the year 2017 is $1114.17

So, Faaz will receive CPP of $1114.17 monthly and Hima will receive 40% of 1114.17 i.e., $445.67.

The CPP Pension Sharing is always a 2 way Sharing (i.e.,) for eg., if husband gives 50% of his CPP pension to his wife then Wife should also give 50% of her CPP pension to her husband.

It is not common that couples share their CPP between them in 50/50 basis. Instead they share the CPP among them based on No.of years they Lived together (i.e) based on their Joint Contributory period.

No.of years Lived together	% of joint contributory period (50 years)
10	20
20	40
30	60
40	80
50	100

As you can see couples should live 50 years together for 50/50 sharing. As Faaz and Hima are married together for 30 years they can split CPP on the 60% ratio i.e., 30/30. Faaz can give 30% of his CPP to Hima and in return Hima should give 30% of her CPP to Faaz.

CALCULATION OF CPP AFTER SPLIT:

Faaz's CPP before Split    = $1114.17

Faaz's 30% of CPP to Hima = $334.25 (30% of 1114.17)

Hima's CPP before Split = $445.67

Hima's 30% of CPP to Faaz = $133.70 (30% of 445.67)

Faaz's CPP after Split    = Faaz's CPP before Split - Faaz's 30% of CPP to Hima + Hima's 30% of CPP to Faaz

= $1114.17 - 334.25 + 133.70

Faaz's CPP after Split = $913.62

Hima's CPP after Split    = Hima's CPP before Split - Hima's 30% of CPP to Faaz + Faaz's 30% of CPP to Hima

   = $445.67 - 133.70 + 334.25

Hima's CPP after Split   = $646.22